Tax filings give hint to number of marijuana shops in L.A.Los Angeles' finance office says 457 pot shops have filed renewals to pay taxes this year, but more than 1,100 medical marijuana collectives are actively registered.

April 02, 2014 | Kris Hermes

More than 450medical marijuana shops have filed renewals to pay Los Angeles business taxes this year — more than three times as many as are allowed to stay open under Proposition D.

The new numbers won't settle the debate over how many medical marijuana businesses are now operating in Los Angeles. Additional pot shops may be open but have fallen delinquent on their taxes. Some may have never registered to pay taxes at all.

But the numbers provide the latest hint at what has happened since Los Angeles voters passed new rules attempting to restrict medical marijuana shops.

"My impression overall is that fewer are operating now," said Don Duncan, the California director of Americans for Safe Access, which advocates for legal access to cannabis for therapeutic use and supported Proposition D. "But it's so hard to quantify."

Before Proposition D passed last spring, police estimated there were roughly 700 pot shops in the city, though other estimates from marijuana legalization advocates and neighborhood groups pegged the number much higher. Fewer than 140 medical marijuana businesses are eligible to stay open under the new rules, according to city estimates.

Earlier this year, City Atty. Mike Feuer announced that more than 100 shops had shut down since the new rules went into effect. But when reporters asked Feuer exactly how many medical marijuana dispensaries were still operating in the city, he said he had no way of knowing.

Tax records have offered one clue: More than 1,100 medical marijuana collectives are actively registered to pay business tax in Los Angeles, according to figures released last month by the city's finance office. The Greater Los Angeles Collective Alliance, a voluntary association of medical marijuana collectives, estimates that when duplicate registrations are excluded, that number falls to less than 900.

However, it's unclear if that many medical marijuana businesses are actually operating. A business may obtain a registration certificate but never actually open. It might also close but fail to notify the city.

Tax renewals offer another hint at how many such businesses are operating. After registering, Los Angeles businesses must file an annual renewal to report their taxable gross receipts. So far this year, 457 medical marijuana collectives have done so, according to Office of Finance General Manager Antoinette Christovale. The deadline for a "timely" filing this year was in February.

Feuer said it was still impossible to know exactly how many pot shops were open but heralded the new figures as "a sign of continued progress." The number is much lower than the estimated number of medical marijuana businesses open before Proposition D, he said.

Some questioned whether tax renewals were a good measure of how many shops were open.

"People are aware that they're being targeted for enforcement and they're refusing to renew," said attorney David Welch, who opposed Proposition D and represents a medical marijuana business that is challenging its prosecution under the measure. "I don't think it should be used as an indication that medical marijuana collectives are closing down."

Despite the crackdown, the city has kept registering new collectives to pay business taxes. Last month, the finance office reported that since the new law went into effect, more than 300 pot shops had registered, including nearly 200 that had no previous records in the tax system.

"It makes absolutely no sense that the Office of Finance continues to issue the [business tax registration certificates] and they're not checking to see if these are legal or illegal operators," said Councilwoman Nury Martinez, who has raised concerns about medical marijuana businesses in her district. "The city should not be collecting taxes on illegal operators."

Feuer has warned newly registered shops that "if they've opened for the first time since 2013, they can't be lawful under Proposition D" and could face prosecution. But he said there were no plans to ask the finance office to prevent them from registering.

Under Proposition D, medical marijuana businesses and the landlords who lease space to them can be prosecuted if the shops don't meet several requirements, including being registered under past Los Angeles ordinances and operating an adequate distance from public parks, schools and other facilities.